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Sprouts Farmers Market performance: Slow but positive

Even with impressive sales growth, costs added up to a flat quarter for Sprouts Farmers Market. As the tide shifts, leadership sees less pressure for the rest of the year.

Sprouts Farmers Market presented a more positive, even if conservative, outlook for 2017 as it reported first-quarter earnings Thursday.

The natural foods retailer reported net sales of $1.1 billion, up 14 percent over the same period in 2016.

With deflationary concerns easing and the competitive landscape changing, Sprouts revised its 2017 guidance by increasing net sales growth from a 12-to-13 percent range to 12.5 percent to 13.5 percent, and upping comparable store growth from zero to 1 percent to a range of 0.5 percent to 1.5 percent.

CEO Amin Maredia said today’s environment is "relatively competitive out there," but he’s pleased with the company’s traction on tonnage, private label growth, deli expansion, and meat and seafood department enhancements.

Sprouts’ focus on growing its private label program has resulted in 2,100 items across the store accounting for 11 percent of revenues. Management expects its branded products to exceed $500 million in 2017 sales.

This year will see the rollout of its expanded foodservice department to 50 new and existing stores. The full program includes salad bar, juice service, soup stations, a fresh-cooked proteins and sides set, and more deli and ready-to-eat options.

In meat and seafood, the company has focused on growing and improving service, product and merchandising.

While Maredia did not highlight the company’s delivery partnership with Amazon Prime as an integral part of its growth strategy, Sprouts outlets offering the service will grow to 20 in 2017.

Meanwhile, tempered new store growth by competitors and less aggressive ad plays combined with more disciplined everyday pricing has changed the competitive landscape, Maredia said. He expects competition in fresh promotions to continue, however.

Additional first-quarter highlights included:

  • Comparable store sales grew 1.1 percent and two-year comparable store sales grew 5.9 percent.
  • Net income of $46 million; flat from the same period in 2016
  • Gross profit growth of 10 percent to $337 million, resulting in a gross profit margin of 29.8 percent. 
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